How To Approach Fixed Income Investing in a Low Interest Rate Environment
Bonds have historically been an investment of choice for those looking to diversify their portfolios. Today’s market is no different, but the challenge comes in determining what types of bonds to invest in and the length of time to invest, says Jim Bernard, CFA, senior vice president and director of fixed income portfolio management at Ancora Advisors LLC. “A prudent moveright now in our opinion is to focus on bonds maturing within a three- to seven-year time period,” says Bernard. “Interest rates are very low right now, so it may be tempting to go out to longer dated bonds to get yield. But most investors should be very careful about locking their money up for too long a time. If interest rates increase, the value of existing long dated bonds will likely decrease materially in value. It would then be a long time until maturity before investors get their money back at par value.”
Smart Business spoke with Bernard about the value in U.S. fixed incomes markets and the primary risks faced by investors.
Can you put today’s interest rate environment into historical perspective?
What are the primary risks fixed income investors face today?
How do you view the current municipal bond market?
Are non-U.S. dollar denominated sovereign bonds a good investment?
What are the keys to being an effective long term fixed income investor?
Jim Bernard, CFA, is senior vice president and director of fixed income portfolio management as well as an Investment Advisor Representative of Ancora Advisors LLC, (an SEC Registered Investment Advisor). In addition, he is also a Registered Representative and a Registered Principal of Ancora Securities, Inc. (Member FINRA/SIPC). Feel free to contact him at email@example.com or (216) 593-5063.